House prices to stagnate for 'years'

[numbercruncher]

Well i think every Sailor, police man, nurse and teacher etc should quit there jobs and drive trucks in mines for treble the salary .....

Truck drivers get treble teachers salaries back in your heydays tech ?

 

[tech/a]

Firstly your taking an extreme case.
Driving a Truck in a mine underground.
Wages for high risk occupations have always been much higher than low risk.

So YES examples of 3 x average wages can and will always be found.

“Those who cannot remember the past are condemned to repeat it.”

Sound familiar.

 

[Flying Fish]

very true.

 

[numbercruncher]

Firstly your taking an extreme case.
Driving a Truck in a mine underground.
Wages for high risk occupations have always been much higher than low risk.

So YES examples of 3 x average wages can and will always be found.



Sound familiar.

I never mentioned anything about this ex teachers job being underground or high risk. But it is in an isolated location, but loads of jobs for anyone that wants to stop nursing the needy/old or whatever and spin some cash.

Heres another example back in the late 80s i had an after school/w end job that paid more than the Government gives our old age pensioners now, and thats not even adjusted for inflation.

Its cool if you cant see that average people are getting screwed, no need to get narci though.


anyway give us some examples from the 80s that you remember instead of dismissing me outright, Ill give another one, back in the 80s my parents take home pay was well over 1k a week combined and a GOOD house cost 100.

But babyboomers did always just have a cake walk.

 

[wayneL]

Firstly your taking an extreme case.
Driving a Truck in a mine underground.
Wages for high risk occupations have always been much higher than low risk.

So YES examples of 3 x average wages can and will always be found.



Sound familiar.

I would argue teaching is more dangerous.:

 

[jet328]

It needs to be fixed asap imho. To me the maths seems simple, on average across society house prices cant Increase as they are near price saturation unless substantial wage increases start flowing.


Im amazed the government has let it get out of control like this.

What a great idea
We'll give people more money, so that they can borrow even more and that will make housing more affordable

I don't think you've thought this through.

I think we need more multi storey development inner city and more land released on the outer.

Also I disagree that housing is unaffordable (only familiar with the melb market)
Its more that the houses that people can buy differ to what they feel they are "entitled" to.
They've grown up with their parents in nice inner to middle city houses and are now upset they can't afford what they are accustomed to or feel they are "entitled" to.

Cheers

 

[numbercruncher]

What a great idea
We'll give people more money, so that they can borrow even more and that will make housing more affordable

I don't think you've thought this through.

Excellent idea .....


Lets reduce everyones wages instead and force the pesky buggers out of public service into mines.

Oh wait weve already effectively reduced there wages substantially with our sneaky inflation accounting method.


sweet.

 

[Flying Fish]

What a great idea
We'll give people more money, so that they can borrow even more and that will make housing more affordable

I don't think you've thought this through.

I think we need more multi storey development inner city and more land released on the outer.

Also I disagree that housing is unaffordable (only familiar with the melb market)
Its more that the houses that people can buy differ to what they feel they are "entitled" to.
They've grown up with their parents in nice inner to middle city houses and are now upset they can't afford what they are accustomed to or feel they are "entitled" to.

Cheers

WOW so what does that mean?

 

[Smurf1976]

And so the cycle goes on.

The same rhetoric was heard in the late 80s and will be heard again throughout time from generation to generation.

The late 1980's. Just before the last recession after which houses were back to selling at low multiples of income.

 

[Smurf1976]

Also I disagree that housing is unaffordable (only familiar with the melb market)
Its more that the houses that people can buy differ to what they feel they are "entitled" to.
They've grown up with their parents in nice inner to middle city houses and are now upset they can't afford what they are accustomed to or feel they are "entitled" to.

Easy way to prove this one.

Can someone earning the median wage realistically afford to buy the median priced house with a mortgage which will remaing serviceable at all points in the interest rate cycle?

 

[wayneL]

The late 1980's. Just before the last recession after which houses were back to selling at low multiples of income.

Exactly, that one leaped out at me to. I was wondering who would pick up on it.

 

[Kathmandu]

So, how much would you all like to pay for a first home?

How far from Transport , shops, schools and GPO.

I know that I have got on RE.com and found houses in every capital city in OZ for around the $300k mark that are within 30Klm of GPO, most with transport nearby.

Are these affordable enough ??

Dave

 

[toothfairy]

Easy way to prove this one.

Can someone earning the median wage realistically afford to buy the median priced house with a mortgage which will remaing serviceable at all points in the interest rate cycle?

Just because they are both described as "median" does not necessary mean people on median wage should be owning a median price house for at least 3 obvious reasons that I can think of :
1) there is a phase shift between the time frames of the 2 median points. By that I mean people start off at low wages and they rent or better still, stay @ parents'; then if everything goes on track or better, they save a deposit AND earn median wages before they buy their first home at lower end of the market. Then they upgrade to a median price house when they earn ABOVE median wages, etc, etc.
2) it is very common to have a partner (trendy word) who earns wages to buy together.
3) as mentioned above, people who buy median price houses (usually joint effort) have a previous asset to trade up to, so they may have above average down payment, they may only need to borrow 70%.
Cheers.

 

[Smurf1976]

Just because they are both described as "median" does not necessary mean people on median wage should be owning a median price house for at least 3 obvious reasons that I can think of :
1) there is a phase shift between the time frames of the 2 median points. By that I mean people start off at low wages and they rent or better still, stay @ parents'; then if everything goes on track or better, they save a deposit AND earn median wages before they buy their first home at lower end of the market. Then they upgrade to a median price house when they earn ABOVE median wages, etc, etc.
2) it is very common to have a partner (trendy word) who earns wages to buy together.

Some fair points there although I must point out that if (2) is required now then that in itself is outright proof that housing is less affordable. If one wage bought a house and raised a family 25 years ago then at the very least the wage paid for that job today ought to buy a comparable house and standard of living. If that were the case then we would have had effectively zero economic progress for the working individual over the past quarter century, at least in terms of housing affordability. That a single wage for the same job now buys a lesser house, or more likely no house at all, means we've gone backwards.

Someone made the point in a local newspaper not long ago. 20 years ago the family bought a house that cost 2 times the husband's income from a public service job. Today that same house costs 7 times the income paid to someone doing the same job in the public service. No matter how you look at it, housing costs more now than it did then relative to wages. We've gone backwards.

The only way the house costs a comparable amount is if you factor in a halving of intrest rates, assume a 100% mortgage and two incomes instead of one. On that basis the mortgage repayments aren't that different as a percentage of total household income. However, it now requires a near doubling of work effort to buy the exact same thing. Better than 3.5 times as much but we've still clearly gone backwards. An that's assuming that interest rates peak at half the 17% rates of the previous cycle - a rather big gamble to say the least given that to do so is to see a peak below the long term average.

More likely, interest rates will undergo the full cycle and we'll see rates back at 15%+ at some point - those who paid 7 times earnings are truly stuffed if that happens unless there's a wages explosion to match. But then if we're going to factor in rising wages we need to consider that they were also rising pretty quickly in the 70's and 80's. Indeed it is that inflation which largely paid off, via destruction of the real value of the debt, the "big" mortgages taken on at the time.

Today's mortgages are even larger relative to income and indeed interest costs are higher than at any point for several deades. Do the math and we need wages growth on a scale that exceeds even the unions' wildest dreams before we end up with a comparable overall housing affordability.

At some point I think we will see the wages boom as there's certainly a lot of pressure building there with labour shortages etc. Indeed inflation is realistically the only thing that will enable the massive debts taken on in recent years - from Australian mortgages to the US government - to be repaid in nominal terms without posing a major long term drag on consumption and the general economy.

My best guess is inflation is exactly what we're about to see and it's a lot closer than most think - the turmoil in the makets at the moment providing the perfect trigger and also being at least a partial recognition of the situation. Bond holders and those with cash are about to get seriously shafted IMO in order to bail out the debtors. Exactly what's happened plenty of times before.

 

[Flying Fish]

"Bond holders and those with cash are about to get seriously shafted IMO in order to bail out the debtors. Exactly what's happened plenty of times before"

HI don't understand what you mean by cash holders. If rates go to 15%, then cash in the bank is ideal is it not?

 

[wayneL]

"Bond holders and those with cash are about to get seriously shafted IMO in order to bail out the debtors. Exactly what's happened plenty of times before"

HI don't understand what you mean by cash holders. If rates go to 15%, then cash in the bank is ideal is it not?

No, because by the time you account for inflation and taxation, the return is negative.

At the moment, because of true inflation (not the fraudulent CPI), real interest rates are actually negative and you can be sure this will continue even as interest rates increase.

Cash is only a good thing in a deflationary environment.

 

[Flying Fish]

No, because by the time you account for inflation and taxation, the return is negative.

At the moment, because of true inflation (not the fraudulent CPI), real interest rates are actually negative and you can be sure this will continue even as interest rates increase.

Cash is only a good thing in a deflationary environment.

So what does one do? Buy into shartemarket that is tanking? Borrow big time to invest in inflated property?

 

[tech/a]

Exactly, that one leaped out at me to. I was wondering who would pick up on it.

Yeh and they did that from 1990ish to around 1998 and they will one day---around 12-15 yrs do it again.

 

[nioka]

HI don't understand what you mean by cash holders. If rates go to 15%, then cash in the bank is ideal is it not?

If rates go to 15% inflation will probably go to 10%. You will be taxed on the 15%. net result= negative real income. I've seen it happenin the past.

 

[toothfairy]

Some fair points there although I must point out that if (2) is required now then that in itself is outright proof that housing is less affordable. If one wage bought a house and raised a family 25 years ago then at the very least the wage paid for that job today ought to buy a comparable house and standard of living. If that were the case then we would have had effectively zero economic progress for the working individual over the past quarter century, at least in terms of housing affordability. That a single wage for the same job now buys a lesser house, or more likely no house at all, means we've gone backwards.

Yes, in the sense of affordability, we have definitely gone backward. Hence there is a phase shift in the time frames of the median prices. This shift may get worse unless we have real wage increases. And that's not impossible.
It's quite obvious that nowadays couples are having children later so that they can work longer to pay mortgages compared to our parents' time. You just have to walk around local schools (particularly expensive private schools) and sometimes you can't work out whether the kids are being dropped off by their parents or grandparents. Either the parents are working or they are in their 50's .
Another point about house prices is, the top end (million dollars ++) ones are old money accumulated through generations. While wages paid to an individual cannot be inherited. So one cannot equated these top properties to owners' wages. I know of a lot of old people who sit on one million dollar houses in Richmond, Vic who are on pensions. Can't do anything about it, may be put yourself up for adoption by one of them.